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Make your position size relevant

Posted By Robert On Saturday, January 25th, 2014 With 0 Comments

Now this is a controversial one and this article mainly applies to certain Market Makers but has applications in relation to stop losses for all providers. While it is rare, you may be personally targeted as a ‘Trader of interest’ or ‘VIP client’ by a Market Maker. CFD traders placing bigger orders and/or making reasonably consistent profits get looked at closer so that a provider can give you better service, make sure they are hedged big enough for the trades you are placing and get in and out of your trades quickly to minimise slippage. Filling larger orders can be more difficult so you may get slipped for this reason or because it’s late in the session and a dealer is behind in profits. The more unscrupulous dealers may look to make a more substantial block of profit from you… just maybe?

Now there are more tangible reasons to break up larger orders which have a big size relative to the normal turnover ranges.

As we can see in the market depth example following, if we wanted to sell 200,000 share CFDs at $3.03 each and the market was starting to move down quickly, the dealer might want to fill you at $3.00 where he can justify the volume as being instantly available, whereas 3 orders of say 70,000, 70,000 and 60,000 all at 3.03 would have seen you filled probably at $3.03, 3.02 and 3.01 respectively saving you $4,100 slippage (70k x .03c better fill, 70k x .02c and 60k x .01 approx depending on exact quantities).

Market Depth

Orders placed with a Market Maker at position sizes under whatever the dealer has as the default daily amount (let‟s say $20,000) are typically transacted by the computer automatically at the best price. However, larger orders may need dealer approval. If you are a regular profit taker and have yourself on a ‘preferred’ list you may get your orders adjusted – meaning extra slippage, particularly in a busy time of the day.

An alternative to all of this is to just trade the more liquid CFDs in the Top 100, indices or FX where the order sizes have to be very significant to warrant intervention.

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